Maryland’s Data Center Boom Is Real. The Accountability Isn’t.

By Michel Phillips | MDBayNews

Maryland’s leaders like to frame the state’s data center push as a smart, forward-looking bet on the digital economy. AI, cloud computing, and hyperscale infrastructure are here to stay, and the argument goes that Maryland must compete with Virginia, Texas, and other fast-moving states—or be left behind.

That case deserves to be taken seriously. What does not deserve a free pass is the way Maryland has handled transparency, oversight, and fiscal accountability around data center incentives.

A Tax Policy That Operates in the Dark

Since 2020, Maryland has offered a full exemption from the state’s 6% sales and use tax on qualifying data center equipment. In some cases, that exemption can last up to 20 years. The policy was adopted quietly, justified as necessary to remain competitive with Northern Virginia’s data center corridor.

Five years later, Maryland still cannot—or will not—answer a basic question: How much does this cost taxpayers?

There is no dedicated Comptroller report tracking annual or cumulative revenue losses. There is no public list of certified data centers. There is no disclosure of which companies benefit or for how long. The only official estimate remains a hypothetical figure from a 2020 fiscal note, never intended to reflect real-world utilization.

That might have been defensible when data center activity in Maryland was minimal. It is indefensible now.

“Negligible” Then. Unknown Now.

The Comptroller’s FY 2022 tax expenditure report described losses from the data center exemption as “negligible,” based on early years when few projects had come online. That label is now outdated—but it has never been updated or corrected.

Since then, Maryland has aggressively courted hyperscale development. Projects measured in hundreds of megawatts—and potentially gigawatts—are no longer hypothetical. Equipment purchases run into the hundreds of millions, if not billions, of dollars. Yet the public accounting remains frozen in time.

If the losses are still negligible, state officials should have no trouble proving it. If they are not, taxpayers deserve to know.

Fiscal Discipline for Everyone Else

What makes this worse is the broader fiscal context. In 2025, Maryland raised taxes to close budget gaps, including imposing a new 3% sales tax on certain data and IT services such as cloud computing and software-as-a-service. Small and mid-sized businesses were told these changes were necessary to fund infrastructure and core services.

At the same time, the state preserved a long-term, open-ended tax exemption for capital purchases by some of the largest corporations in the world—without publishing a clear cost-benefit analysis.

That is not principled economic policy. It is selective transparency.

Jobs, Growth, and Honest Math

Supporters of the incentives argue that data centers bring construction jobs, local property tax revenue, and long-term economic spillover. Those claims may well be true. But they are not an argument against disclosure—they are an argument for it.

Even critics of data center subsidies, including watchdogs like Good Jobs First, acknowledge that states are free to pursue growth strategies. What they object to is the routine refusal to measure outcomes against promises.

From a center-right perspective, this is not about opposing development or demonizing technology. It is about insisting that government apply the same standards to itself that it applies to taxpayers: show the numbers, justify the expense, and revisit policies when conditions change.

Compete—But Compete Honestly

Maryland can compete for data centers without competing against its own taxpayers. That starts with simple reforms:

• Annual reporting on revenue foregone from data center exemptions
• Disclosure of certified projects and exemption durations
• Periodic legislative review tied to actual outcomes, not assumptions

Markets work best with transparency. So does government.

Maryland’s data center boom may turn out to be a smart bet. But until state leaders are willing to show their work, the policy looks less like strategic investment—and more like governance by blind faith.

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